Nvidia CEO Jensen Huang (left) dines with Alice Huang, a former executive at Megaspeed suspected of spying for China, at a restaurant in Taipei, Taiwan, in May last year. [AFP]
Nvidia CEO Jensen Huang (left) dines with Alice Huang, a former executive at Megaspeed suspected of spying for China, at a restaurant in Taipei, Taiwan, in May last year. [AFP]

Nvidia shares fell about 4.2% on the US online brokerage platform Robinhood on Sunday (local time) after a scandal emerged alleging that CEO Jensen Huang had an affair with a woman suspected of spying for China and that Chinese authorities had "targeted" him.

Bloomberg said the scandal would add further downward pressure on Nvidia's share price, which leads the AI chip market.

Nvidia shares had already fallen about 22 percent from their October peak, weighed down by concerns over funding for big tech companies' investments and expectations that a sweeping Democratic Party victory in the US midterm elections would lead to tighter data center regulation.

After the scandal broke, Huang acknowledged the affair in an internal memo over the weekend and apologized to his family and employees. Nvidia's board launched an independent internal investigation, saying it had found no basis to conclude that national security had been compromised or that proprietary information had been leaked, and that Huang's ability to lead the company would not be affected.

However, analysts expect the fallout to grow. Huang's affair partner has been identified as Alice Huang — known in Chinese as Huang Le — a former executive at Singapore-based Megaspeed, who is under suspicion by US intelligence agencies of having conducted espionage on behalf of China. US authorities determined as early as the first half of this year that Alice Huang had been targeting the CEO and that the two were believed to be in a romantic relationship. Megaspeed operates a small office with little local business presence yet purchased $2 billion worth of Nvidia products over the past several years, raising suspicions that it may be a front company used to secure Nvidia chips for China.

Josh Gilbert, an analyst at eToro, said "any doubt about his position will be a significant concern for shareholders," adding that while the board had come out in support of Huang, "the investigation is still in its early stages. Investors will need to factor in the possibility that the probe raises further questions before the picture becomes clearer."

Tim Waterer, an analyst at KCM Trade, said the allegations were "creating a source of anxiety for Nvidia's share price in the short term, as a CEO undergoing an internal investigation creates uncertainty that needs to be priced in." He added, however, that "the combination of President Donald Trump's public support for Jensen Huang and the perception that underlying industry demand for AI hardware remains solid is helping the market digest the news to some extent."

Anna Wu, an analyst at Floodline Research, said the scandal was "clearly a negative for both the company and the CEO, but the damage so far appears to be contained rather than spreading into a systemic issue." She added that the bigger factors currently weighing on Nvidia's share price were "the semiconductor selloff that followed the midterm elections and the earnings release scheduled for Nov. 17."


kate01@heraldcorp.com